B&L Landscapes, Inc. Mini Practice Part 3

Bill Graham and Larry Miller incorporated B&L Landscapes, Inc. on July 1, 2014. The business consists of lawn care and sprinkler system installations. In addition, they also sell two types of fertilizer.

At the end of the first year, Bill and Larry have asked you to analyze their first year of operations and given them some suggestions on areas that may need improvement as they move into their second year.

Below are the balance sheets for the date of incorporation and the end of the first year of operations.

Additional Information:

Net Income for the year ending June 30, 2015 was $32,500 and $2,000 was paid in dividends.

Net Sales for the year ending June 30, 2015 was $221,000.

Assets
Current assets	45%
Plant assets (net)	55%
Total assets	100%
Liabilities
Current Liabilities	18%
Long-term liabilities	15%
Total liabilities	33%
Stockholders' Equity
Common stock, $1 par	10%
Preferred stock, $100 par	20%
Retained earnings	37%
Total stockholders' equity	67%
Total liabilities and stockholders' equity	100%

Industry Averages Landscaping Services

Instructions:

Using the two balance sheets provided, prepare a horizontal and vertical analysis for the period ending June 30, 2015. You only need to complete one vertical analysis using the June 30, 2015 balance sheet values.

Compare the vertical analysis results with the industry average information provided and identify any areas that you believe merit further investigation, including why you would investigate them further and likely reasons for the results.

Calculate the following ratios for the company:

Current Ratio

Acid-test ratio

Profit Margin

Asset Turnover

Return on Assets

Debt to Assets Ratio

Instructions:

Using the two balance sheets provided, prepare a horizontal and vertical analysis for the period ending June 30, 2015. You only need to complete one vertical analysis using the June 30, 2015 balance sheet values.

Compare the vertical analysis results with the industry average information provided and identify any areas that you believe merit further investigation, including why you would investigate them further and likely reasons for the results.

Calculate the following ratios for the company:

Current Ratio

Acid-test ratio

Profit Margin

Asset Turnover

Return on Assets

Debt to Assets Ratio

B&L LANDSCAPES, INC BALANCE SHEET une 30, 2015 Assets Current Assets Cash Accounts Receivable (net) Prepaid Insurance Inventory $ 26.500 9,000 1,500 39.125 Total Current Assets $ 76,125 Property, plant and Equipment 9,000 Land Building 35,000 1,625 26,500 3,000 Less Accumulated Depreciation - Building 33,375 Equipment 65,875 $ 142,000 Less Accumulated Depreciation - Building 23,500 Total assets Current Liabilities Accounts Payable $19,500 Long-Term Liabilities 45,000 $64,500 Notes Payable Total liabilities Stockholders' Equity Paidin Capital Capital Stock 5% Preferred stock, $100 par value, non-cumulative. non-participating, 5,000 shares authorized, 700 shares issued and outstanding Common stock, $1 par value, 150,000 shares authorized, 40,000 shares issued and outstanding 7,000 40,000 47,000 30,500 77,500 $ 142,000 Total Capital Stock Retained Earnings Total stockholders' equity Total liabilities and stockholders' equity